The SPX moved lower on Friday while staying above its low of 1,181 on Tuesday and Wednesday. All four broad indices closed higher in April for the third consecutive month, even though they closed lower for the week ending April 30.

The SPX, INDU and COMPQ all stayed above this week's support and formed mini head and shoulder patterns. The SPX mini pattern has a measuring of 35 points and a target of 1,145 if support is broken.

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On Thursday we pointed out bull flag bounces on SPY, DIA, QQQQ and IWM. All four pulled back. Only IWM moved below Tuesday's low, which is the recent low day.

Additionally the bounce in the bull flag patterns on Thursday pulled back on Friday and stayed above Tuesday's low in ACN, BA, BYI, CRM, DHR, GR, MCD, NFLX, PCLN, SPG, UNP, URE, WFC, WHR and ZION. Only CAT, FLS, PCP and SWKdropped below their low on either Tuesday or Wednesday. FLS and PCPreport earnings this next week.BYI, WFC, ZION and PNC were relatively strong in their bull flag pattern on Friday.

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Guidance:

Upward momentum failed on Friday and downward momentum was strong. For the most part bull flag support bounces failed to follow through although many did not fall below a short term stop below the low of this week's low.

The SPX moved toward its 1,178 support level. If this support level breaks on Monday be prepared for a potential move to the next support level of 1,155.

Continue to trade with the trend. Be mentally flexible and be willing to trade when your entry and exit signals appear.

The intermediate term chart target is still 1,255 in approximately nine weeks after the 1,150 breakout on March 16.

The VIX rose +3.61 and did confirm the move down on Friday.

The short term trend is neutral and near support.

The four-month trend is up.

The twelve-month trend is up.

Continue to focus on and trade setups on the charts of the stocks you watch trade with the trend and follow your rules.

GS is down over $8 in pre-market trading following announcement of criminal probe and downgrade by B of A/Merrill. This is leading Financials XLF lower. Healthcare XLV is also lower Friday morning while Industrials XLI, Home builders XHB and Energy XLE are higher.

Guidance:
Upward momentum continued on Thursday confirming the bullish harami on the SPX and the inside day, hammer or bullish harami on many charts inside a bull flag pattern. You may have traded a support bounce on up trending stocks making higher highs and pulling back to higher lows on Thursday as there were dozens if not hundreds of opportunities to do so.

The SPX broke through it 1,200 resistance again on Thursday.

Continue to trade with the trend. Be mentally flexible and be willing to trade when your entry and exit signals appear.

The intermediate term chart target is still 1,255 in approximately nine weeks after the 1,150 breakout on March 16.

The VIX fell -2.64 and did confirm the move up on Thursday.

The short term trend is up.The four-month trend is up.The twelve-month trend is up.

Continue to focus on and trade setups on the charts of the stocks you watch trade with the trend and follow your rules.

The SPX found support at 1,181 (near its 30 DMA) for the second day in a row and formed a potential bullish harami. The rally had some breadth to it as 352 stocks advanced while 144 declined in the SPX on Wednesday.

Many stocks are in bull flag patterns and formed either a bullish harami, hammer or inside day today. Look for a potential bull flag bounce on Thursday.

Guidance:
Wednesday downward momentum stopped and upward momentum increased forming an inside day, a hammer or potential bullish harami on many charts inside a bull flag pattern. Be prepared to trade a support bounce on up trending stocks making higher highs and pulling back to higher lows.

If the 1,178 support breaks, expect price to drop to the next support level at 1,155.

Continue to trade with the trend. Be mentally flexible and be willing to trade when your entry and exit signals appear.

The intermediate term chart target is still 1,255 in approximately nine weeks after the 1,150 breakout on March 16.

The VIX fell -1.73 and did confirm the move up on Wednesday.

The short term trend is neutral.The four-month trend is up.The twelve-month trend is up.

Continue to focus on and trade setups on the charts of the stocks you watch trade with the trend and follow your rules.

Broad indexes were lower on Tuesday amid concerns of debt in Europe. Pre-market trading is a is a small bounce off of Tuesday's low. High prices in financial and energy stocks could lift the market this morning.

The SPX broke through its 1,200 support level and fell to its 1,178 support area closing at 1,183.71. The SPX broke the low of the high day which represents an exit for many short term traders. Prices moved lower against the back drop of worries over the debt crisis in Europe, a falling Euro, a rising dollar and falling interest rates in the U.S. Strong earnings and rising consumer confidence were not enough to counter today's selling.

MMM, DD, SWK and X reported better than expected earnings and closed lower than their opening price because of the broad based selling on Tuesday.

Monday's potential bearish harami was confirmed on Tuesday and did represent a short term exit for some short term traders. Even though Tuesday's move is a counter trend against the intermediate term up trend, be willing to enter bearish trades in accordance with your rules. If1,178 support breaks, expect price to drop to the next support level at 1,155.

Monday's pull back setups formed into classic bull flag patterns on Tuesday. Be prepared to trade a support bounce on up trending stocks making higher highs and pulling back to higher lows.

Continue to trade with the trend. Be mentally flexible and be willing to trade when your entry and exit signals appear.

The intermediate term chart target is still 1,255 in approximately nine weeks after the 1,150 breakout on March 16.

The VIX rose +5.34 and did confirm the move down on Tuesday.

The short term trend is down.The four-month trend is up.The twelve-month trend is up.

Continue to focus on and trade setups on the charts of the stocks you watch trade with the trend and follow your rules.

Guidance:
The SPX closed lower on Monday as the market took a rest with decliners leading advancers by a small margin. A potential bearish harami could lead to a short term exit for some short term traders.

There are a large number of pull back setups on the charts on Monday.

Continue to trade with the trend. Be mentally flexible and be willing to trade when your entry and exit signals appear.

The intermediate term chart target is still 1,255 in approximately nine weeks after the 1,150 breakout on March 16.

The VIX rose +0.85 and did confirm the lower close on Monday.

The short term trend is up.The four-month trend is up.The twelve-month trend is up.

Continue to focus on and trade setups on the charts of the stocks you watch trade with the trend and follow your rules.

BMO – ES +2.00 and NQ +1.50 futures are lower in pre-market trading pointing to a lower open. In pre-market trading AAPL is +1.92, AMZN +0.77, INTC is down 6 cents, BAC up 1 cent and GS up 10 cents.

Broad indexes closed at new highs on Friday after a strong second week of earnings season. Week three starts today with a large number of companies reporting. We have listed those that are of particular interest from the INDU, NDX and other watch lists.

UAUA, LCC and CAL merger news suggesting that UAUA and LCC will not merge and that a combination of UAUA and CAL is possible but that stock price is a significant issue. Reportedly CAL wants to use the pre-rumor price when UAUA was lower. LCC and AMR may be is discussions.

The SPX opened near Thursday's close and worked its way to a new high close on Friday as did the INDU, TRAN, COMPQ and RUT. Under Dow theory today's new high close on both the INDU and TRAN confirms the current primary up trend.

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The SPX recovered from last Friday's sell off (led lower by GS) after making a slightly lower low on Monday and rallying 33 points during this key earnings reporting week. Obviously net buying indicates that big money is willing to buy after strong earnings like AAPL, NFLX, SNDK, SBUX, DHR, BA, DECK and LRCX.

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Earnings season continues next week with a large number of INDU, SPX, NDX and secondary companies reporting.

Guidance:
Friday was both a diagonal pennant breakout and a horizontal breakout on the SPX. The short term chart target from the pennant is 1,239, just 16 points less than the intermediate term 1,255 target from the 1,150 horizontal breakout.

There are a large number of support bounce and horizontal resistance breakout setups on the charts Thursday and Friday.

Continue to trade with the trend. Be mentally flexible and be willing to trade when your entry and exit signals appear.

The intermediate term chart target is still 1,255 in approximately nine weeks after the 1,150 breakout on March 16.

The VIX rose +0.15 and did NOT confirm the higher close on Friday.

The short term trend is up.The four-month trend is up.The twelve-month trend is up.

Continue to focus on and trade setups on the charts of the stocks you watch trade with the trend and follow your rules.

The SPXopened lower and fell for the first 15 minutes of the trading...and...then buyers stepped in at the 1,190 support just above Monday's support low and the SPX rallied 20 points with a close 1,208.67. The rally was led by home building and retail stocks while materials and financial stocks also finishing strong.

Earnings announcements were also a big part of Thursday's gains with AAPL and ZION continuing to perform well and NFLX, SNDK, SBUX, DHR, BA and LRCX with big moves following earnings. QCOM and EBAY dropped after earnings and CREE rebounded after falling yesterday. DECK had big move going into earnings after the close.

Guidance:Thursday was an excellent example of why I teach that pre-market futures action does not give a trader any indication of how the market will do. It only gives an indication of where the market will open. Once cash traders enter the market it goes where they take it. The futures are not a crystal ball just simply a derivative trading instrument that trades based on buying and selling.

Continue to trade with the trend. Be mentally flexible and be willing to trade when your entry and exit signals appear.

The intermediate term chart target is still 1,255 in approximately nine weeks after the 1,150 breakout on March 16.

The VIX rose +0.15 and did NOT confirm the higher close on Thursday.

The short term trend is up.
The four-month trend is up.
The twelve-month trend is up.

Continue to focus on and trade setups on the charts of the stocks you watch trade with the trend and follow your rules.

The SPX pulled back to 1,200 support testing Tuesday's breakout before rising and closing down just 1.23 points for the day at 1,205.95.AAPL gapped higher on Wednesday after a strong earnings report after the close on Tuesday. BA also moved higher after reporting better than expected earnings. ZION gained another 5% after a smaller than expected loss and raised guidance on Monday.

Stocks are generally higher in pre-market trading lifted by financial and energy stocks and positive earnings announcements. Look for a continuation of Monday's support bounce and potential bull flag confirmation.

The short term is neutral but may turn up today and the intermediate term and long term trends are up.

Trade those charts that meet your rules in the direction of the trend.

Dave Johnson, CMT

David Johnson, CMT
Investment professional for 40 years including analyst, portfolio manager, trader and trading instructor. Performing computer based technical analysis since 1990. Previously quantitative and fundamental analysis. Has trained more than 40,000 traders in over 250 events including two and four day training events.
Email: chartsignals@yahoo.com